CANADA FX DEBT-C$ touches 2009 high, helped by oil; bonds mixed

Tue May 5, 2009 9:37am EDT
 
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 * Risk appetite on the rise
 * Canadian dollar hits highest level in nearly 6 months
 * Bond prices mixed
 By Ka Yan Ng
 TORONTO, May 5 (Reuters) - The Canadian dollar climbed to
its highest level versus the U.S. currency in nearly six months
on Tuesday as demand for riskier currencies was on the rise.
 This week's rebound in commodity prices, oil in particular,
helped the Canadian currency hit C$1.1677 to the U.S. dollar,
or 85.64 U.S. cents, its highest since Nov. 10. Crude, a key
Canadian export, neared $55 a barrel. [ID:nN05259496]
 The currency has recently traded in tandem with equity and
commodity markets, in line with a theme of investors
increasingly willing to take on more risk.
 "The main thing is increased risk appetite amid signs
global recession is easing," said Sal Guatieri, senior
economist at BMO Capital Markets.
 At 9:10 a.m. (1310 GMT), the Canadian unit was at C$1.1703
to the U.S. dollar, or 85.45 U.S. cents, up from C$1.1735 to
the U.S. dollar, or 85.22 U.S.  cents, at Monday's close.
 With no major Canadian economic data was due on Tuesday,
markets will be watching for employment data, the Ivey
Purchasing Managers' Index, and housing reports later this
week. U.S. employment figures are due on Friday.
 A key risk this week may also be the U.S. Federal Reserve's
release of the bank stress test results. [ID:nN04553413]
 BONDS MIXED
 Canadian bonds were mixed with long bonds edging higher,
while shorter-dated debt dipped, as investors weighed equity
market appetite and supply.
 Bonds have been flat to lower in recent days as equity
markets rose to their best levels in nearly six months.
 "Given the return of risk appetite and strong rallies in
equity markets, it's actually surprising that bonds haven't
weakened further," said Guatieri.
 "In the background, the Fed's purchases of Treasuries are
putting a ceiling on U.S. Treasury yields and that's tending to
support the Canadian market as well."
 The two-year Canada bond fell 7 Canadian cents to C$100.42
to yield 1.044 percent, while the 10-year bond rose 27 Canadian
cents to C$105.90 to yield 3.065 percent.
 The 30-year bond rose 10 Canadian cents to C$119.60 to
yield 3.852 percent. In the United States, the 30-year Treasury
yielded 4.049 percent.
 (Reporting by Ka Yan Ng; Editing by Jeffrey Hodgson)